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The new charge accused the company and its founder, Changpeng Zhao, of enabling widespread money laundering and violating U.S. financial regulations.
A global crypto trading platform, Binance has been hit with a new class action lawsuit in the U.S. Western District Court of Washington over money laundering allegations.
Binance and its founder, Changpeng Zhao, were the targets of the lawsuit filed at the U.S. Western District Court of Washington.
At the Heart of the Allegations
It has been filed by three former Binance users: Philip Martin, Natalie Tang, and Yatin Khanna.
They claim that criminals laundered cryptocurrency, which was stolen from them, because of lax compliance measures on this platform, leading to millions of dollars in financial losses for American users.
According to the plaintiffs, Binance is running an unlicensed money-transmitting business, with Zhao allegedly averting his eyes from AML regulations.
The lawsuit alleges that this was able to happen because of this oversight, which thus allowed the platform to process those transactions trying to conceal their illegal origin.
Plaintiffs further say that Binance deliberately evaded compliance with American financial regulations, contributing to its extraordinarily fast growth.
If Binance were to follow the rules, it probably wouldn’t have been able to gain a foothold it currently has in the American market.
A closer look at Changpeng Zhao
Now in the thick of the lawsuit is Changpeng Zhao, the founder of Binance in 2017. The argument was that Zhao caved to the demands of profits over compliance, establishing an environment through which US users could circumvent the few checks the platform had in place.
The plaintiffs said that had created a pure haven for laundering cryptocurrency, with the majority of it coming from hacks and other illegal activities.
His leadership is under scrutiny for allegedly having allowed such practices to take place that could have propagated criminal behavior worldwide.
Binance’s Response.
In the wake of these allegations, Binance joined the fray touting its efforts to fight fraudulent activities. The company disclosed that it had blocked more than $2.4 billion from potential user losses related to various suspected scams and frauds during the first seven months of 2024.
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Binance explained that its sophisticated internal engine of risks identified and stopped suspicious transactions with the help of artificial intelligence and manual reviews. In doing so, it protected over 1.2 million users.
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It noted that over $1.1 billion of the said prevented losses were from suspected crypto scams at the withdrawal stage. The company further vowed to keep boosting security features for the protection of its users.
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A Legal Battle with Far-Reaching Consequences.
This lawsuit adds to several other lawsuits to which Binance has already been party in the United States, with the fate to further impede Binance’s operations in the country amid ever-intensifying regulatory scrutiny.
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Knowing full well that this case against Binance may set a very dangerous precedent that could change the entire face of the regulatory space, the whole cryptocurrency industry is keenly watching.
With the lawsuit pending, it remains to be seen whether Binance will continue its operations in the U.S. or not, and this single factor might hugely impact the international crypto market.
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